IRS Sign on Desk

Affordable Care Act Reporting Requirements

Updated October 7, 2021.

As we head into another year of reporting, it’s important to once again familiarize yourself with the basics on Affordable Care Act (ACA) reporting to ensure your organization is in compliance. This is especially important for organizations who may have grown to over 50 employees in 2020 and are now required to report beginning with the 2021 calendar year.

Below is a recap of the basic ACA reporting requirements and the penalties for noncompliance.

Affordable Care Act

The employer mandate requires that you as a company offer “affordable, minimum-value coverage to qualified employees,” if you have 50 or more employees (defined as full-time and full-time equivalents). As an employer, be sure to ask these questions:

  • Did you offer coverage to your qualified employees? This is defined as people working at least 30 hours per week/130 hours per month.
  • Is that coverage deemed affordable? The ACA generally defines “affordable” as 9.83% of total household income for the 2021 plan year, which can be calculated based on W-2 wages or rate of pay.
  • Does that coverage provide minimum value? The general definition for “minimum value” is at least 60% of the total cost of medical services for a standard population, along with substantial coverage of inpatient hospital and physician services.

Who has to report?

For groups with fewer than 50 full-time equivalent employees, there are no reporting requirements as long as your medical plan is fully insured. If a group has fewer than 50 employees but has a self-funded medical plan, including a level-funded or modified self-funded plan, you do have a reporting requirement.

Consequences of noncompliance

If you fail to report to the IRS, you pay $280 per every form you don’t file, up to three million dollars. If you fail to offer coverage or if your coverage doesn’t meet the required affordability thresholds, you can incur some serious penalties, such as:

  • The sledgehammer penalty (or “A penalty”) is for not offering coverage to qualified employees. You pay $2,700 per every full-time employee, minus a credit given by the IRS.
  • The tack hammer penalty (or “B penalty”) is for coverage that doesn’t qualify as “affordable.” You pay $4,060 per every full-time employee for whom coverage is deemed unaffordable, and who receives a subsidy on the Exchange. The tack hammer penalty can never be more than the sledgehammer penalty.

The ACA, for all its merits, took an already complex world and made it even more difficult. Understanding the system and successfully navigating these changes can mean huge benefits not only for your bottom line, but also for your employee culture and business strategy—which, if we’re honest, manifest as bottom line impacts in the end anyway.

As much as many of you would like to forget about ACA reporting, it is a topic to keep front of mind. For many employers, this refresher is old news. If you successfully issued your 1095-Cs and reported to the IRS on time (hopefully with minimal struggle), you should have nothing to worry about. Those who are new to the reporting requirements should start mapping out a strategy now so you’re not caught behind the eight ball at the end of the year.

If you have any questions or need guidance on your reporting requirements, you can send me a note, reach out to Katy Stowers or connect with a member of our Advisory Team.

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